Landlords who own buildings used to make things or store goods are among the luckiest real estate investors in Southern California, especially if your warehouse is in Orange County that is the latest forecast from the USC Lusk Center on Real Estate.
Vacancies are dropping. Rents are going up. Your competition is limited.
And because of their proximity to some of the busiest ports in the world, industrial properties – factories and warehouses – likely will see their values rise as shipping traffic picks up steam.
“If you look at the industrial market in Orange County … it has bottomed,” said Richard K. Green, director of the University of Southern California-based real estate center. Green spoke to Commercial Real Estate leaders this week while in delivering the 2010 Casden Forecast on industrial and office markets.
Specifically, the forecast says:
* Increased demand for industrial space will cause vacancy rates to fall 2.1 percentage points over the next two years, from 6.6% last summer to 4.5% by 2012.
* Average monthly rent will increase 30% by the spring of 2012, rising from a low of 49 cents per square foot last summer to 64 cents a foot in the spring of 2012. * For a 400,000-square-foot building, that increase translates into an extra $60,000 a month in income — or nearly $726,000 a year! * Under normal conditions, USC believes the “natural” vacancy rate to hover around 6% in O.C., so future vacancies are likely to be below average. * O.C. industrial vacancy rates are among the lowest in the nation. THE ONLY SOUTHERN CALIFORNIA MARKET THAT’S TIGHTER IS LOS ANGELES COUNTY. * At the same time, port traffic is up 19% from a year ago. Traffic for shipping containers is up 14.3% from a year ago. * Rising energy costs will make proximity to the ports even more important.
Even after two years, the sector’s recovery won’t be complete, however. For example, 2012’s average monthly rent still will be below the rate charged by landlords in the summer of 2008, when rent averaged 72 cents per square foot.
“Don’t expect to see anything go back to where they were in 2005-06 anytime soon,” Green said. “But we’re going in the right direction.” (credit j. lanser, oc register)